The SMSF Association is lobbying for a targeted exclusion for new builds with regard to the ban on limited recourse borrowing arrangements (LRBA) used for the purchase of residential property.
SMSF Association chief executive Peter Burgess used his appearance last week at a roundtable in Canberra, hosted by opposition housing and homelessness spokesman Andrew Bragg, to advocate for the change.
Also present at the roundtable were representatives from construction, real estate, project marketing, finance, non-bank lending and investment platforms.
“There was certainly a lot of concern about the impact that this ban would have on the supply of housing in this country. The property developers are saying that while they may only be a small portion of a property development project, it’s important for funding to get the approvals that they need to proceed that SMSFs are able to be involved,” Burgess told smstrusteenews after the roundtable.
He also met with Assistant Treasurer and Minister for Financial Services Daniel Mulino’s office to discuss the matter further.
The industry body indicated there is a strong argument to have a carve-out relating to new residential premises given that would align with the government’s stated rationale for exempting new builds from the broader negative gearing and capital gains tax changes.
It is also concerned the changes to the LRBA rules could hurt grandfathered trustees as SMSF lenders might look to exit the market. This could increase settlement and refinancing risk for trustees with an existing gearing strategy in place.
“A trustee who signs a valid off-the-plan contract before 10 August 2026 may settle 12 to 24 months later and still need an SMSF residential LRBA product at settlement. If lenders withdraw products or approvals lapse, the transitional protection is of little practical use,” Burgess pointed out.
Further, he called for clarity around the definition of business real property as the legislation makes future SMSF real property borrowing reliant on the definition in the Superannuation Industry (Supervision) Act, which is a “complex technical test” and not designed as the “gateway” for all SMSF property borrowing.
He suggested the changes may also complicate issues for regional Australians where doctors, pharmacists, vets, motels and roadhouses often operate from mixed-use premises.
“The concern is not that every one of these arrangements will fail. The concern is that they now become threshold LRBA eligibility questions and many lenders may simply decline arrangements that appear too complex or uncertain,” he explained.